Small banks make big gains

Community banks and credit unions show resilience as the battered economy regains strength.

By David Mildenberg

Profits of the Financial 100 shot up last year, continuing a steady rebound since the recession. Banks, thrifts and credit unions based in the state reported net income of about $590 million, 66% more than the previous year, based on data compiled by Charlottesville, Va.-based SNL Corp. Revenue, comprising interest income and fees, increased 1.6%. That total omits Charlotte-based Bank of America Corp. and Winston-Salem-based BB&T Corp., which earned most of their profit outside North Carolina as the nation’s second- and ninth-largest commercial banks, respectively.

SNL ranks the 100 largest financial institutions headquartered in the state each year for Business North Carolina. The complete list, which includes BofA and BB&T, excludes banks such as San Francisco-based Wells Fargo & Co. and Atlanta-based SunTrust Banks Inc., though they rank among the leaders in deposits and loans in the state.

The North Carolina economy has been on the mend, with gross state product mirroring the nation’s slow, steady growth, the N.C. Fiscal Research Division reported in April. The unemployment rate dipped to 6.3% in March, its lowest level since 2008. “There’s no doubt we’ve had some wind at our back over the past two years,” says Richard Moore, the former state treasurer who is CEO of Southern Pines-based First Bancorp.

Still, the upturn hasn’t been strong enough to produce robust loan demand, sparking “fierce competition for what quality loans are available,” N.C. Banking Commissioner Ray Grace says. Federal Reserve policy to keep interest rates low has compressed the spread between those charged on loans and paid to depositors, which has depressed returns. This is the first recovery in which no new banks have been started, Grace adds. The last, Jacksonville-based Coastal Bank & Trust, opened in 2009. From 2005 to 2008, 22 banks opened.

“The economy isn’t growing very well,” says Bob Anders, a former community bank executive who is CEO of Plexus Capital Corp., a private-equity company in Charlotte. “Banks typically grow at the pace of general economic growth, so if you are only growing by about 1%, it’s going to be hard.”

The state’s two big regional banks, BB&T and Raleigh-based First Citizens BancShares Inc., reported lower revenue in 2013 than in 2012. Institutions showing the fastest growth — including CapStone Bank of Raleigh, HomeTrust Bancshares Inc. of Asheville and VantageSouth Bank, owned by Raleigh-based Piedmont Community Bank Holdings Inc. — benefited from mergers. CapStone, which Greensboro-based NewBridge Bancorp acquired in April — is no longer independent. VantageSouth will double in size, to about $4 billion, pending completion of its purchase of Elkin-based Yadkin Financial Corp.

The largest banks to drop off the list were First National Bank of Shelby, which was No. 23 last year, and 1st Financial Services Corp. of Hendersonville, which was No. 35. Bank of the Ozarks Inc., a Little Rock, Ark.-based company, acquired the Shelby bank last year, while First Citizens bought 1st Financial.